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Korean youth gave up the domestic stock market at an unprecedented rate and instead invested in U.S. stocks and cryptocurrencies.
Youth participation declines
Investors in their 20s reported by South Korean securities depositors accounted for only 9.8% of the market last year, down from 14.9% in 2021. People in their 30s fell from 20.7% to 18.8%.
Between 2020 and 2024, stocks in 30s fell from 9.9% to 7%, while ownership in 20s dropped from 2.2% to 1.6%.
Even investors in their 40s have seen their market share fall from 23% to 22.1%. This time, the Exodus allowed investors over 50 to hold 71% of domestic shares.
Market Weaknesses
According to a report from the Korea Daily, the Korean market shows unsettling signs as young businessmen exit. Daily trading volume fell from about 23 trillion won ($16 billion) at the beginning of 2024 to about 18 trillion won at the end of the year.
“The market that loses young investors cannot be called healthy,” warned Kim Sang-bong, a professor of economics at Hansen University.
Alternative investment booms
Last year, nearly half of cryptocurrency investors were in their 20s and 30s. Their trading volume on five major crypto exchanges in South Korea exceeded 25 billion won, accounting for nearly 74% of the KOSPI retail industry.
South Korean investors have almost doubled their foreign stock trading in 2023, from 59 billion shares to 112 billion shares. This growth continued in 2024, up 39% to 156 million shares. In the first quarter of this year alone, Koreans had nearly $11 billion in net purchases of U.S. stock.
Performance-driven transformation
The main reason for this migration is performance. Despite the continued struggle in South Korea, Nasdaq Comprehensive climbed 50% in 2023 and another 25% in 2024.
About 72% of South Korean investors in U.S. stocks make money in 2023, while domestic stocks are only 48%. Cryptocurrencies performed better, with Bitcoin soaring above 160% last year to $108,249, a peak in its history.
The South Korean market is also plagued by structural problems, with the country’s dividend payment ratio ranking 27% of the 16 major economies.
While many experts believe fundamental changes in corporate governance are needed, others believe this is temporary.
“If the South Korean market rebounds, they will return soon,” said Roh Geun-Chang of Hyundai Motor Securities.
Featured images from Medium, charts for TradingView
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